IRS Increases Deductible Standard Mileage Rates Limit

August 16th

The Internal Revenue Service has recently announced an increase in standard mileage rates taxpayers can claim for the final six months of 2011. The rate has been raised from 51 cents to 55.5 cents per mile for businesses, and from 19 cents to 23.5 cents per mile for medical and moving expenses. The per mile tax deduction for charitable expenses remains unchanged at 14 cents.

The increases in the standard mileage rates were designed to reflect this year’s rising gas prises. Such changes ought to have a significant impact on individual Americans.

What Kind of Impact Will These Changes Have?

The business standard mileage rate is used by many taxpayers to calculate the deductible costs of using a car for business. This rate is typically used in lieu of tracking actual costs. The rate can also be used as a benchmark by which the federal government and many businesses can reimburse employees for mileage costs.

Unfortunately, the charitable rate remains unchanged since it was originally set at a 14 cent deduction in 1998. However, in its recent push for simplification of the tax code, the American Institute of CPAs has asked Congress to consider allowing the IRS to set all three mileage rates – business, medical, and charitable – at the same level.

This new, simplified proposal would greatly increase the ease with which individual Americans would use these rates. Taxpayers would only have to consider one rate, instead of three, when filing their tax returns. This measure should reduce the amount of inaccurate tax returns leading to tax audits.